THE LONDON SOUTH BANK OFFICE MARKET Q1 2015

Transcription

1 THE LONDON SOUTH BANK OFFICE MARKET Q1 215 Attention has turned to Vauxhall and Nine Elms where over 15bn of regeneration projects are underway to develop underutilised land to make way for new public spaces, schools, homes, and transport infrastructure. The area will deliver large scale mixed-used developments and will transform one of London s last remaining industrial districts into a world-class destination

2 Overview % of office stock by submarket 22m sq ft Total Office Stock 28% Bankside SE1 London Bridge 23% Waterloo Bankside London Bridge Waterloo Borough West Bermondsey SE1 SE S E1 E1 19% Borough West Bermondsey 8% SE11 SE S E11 E1 11 SE17 SE S E1 E Kennington Pimlico Vauxhall SE11 4% Vauxhall Vauxhall, Kennington Camberwell 2% BURGESS PARK VAUXHALL PARK Nine Elms y l Wa mercia Com ad Ro ington Elm r St Medla Lans down e Way rd MOSTYN GARDENS rk La Wandsworth Road n Rd Cla ph am Peckham Rye rb ha ld Co Rd d lr wel ck Sto ill rh de rl ou ough hbor Loug Rd Quee nstow n Rd Way Denmark Hill Ln h ne thor ilver Sh MAX ROACH PARK en Lav Clapham High Street Denmark Hill Loughborough Junction WYCK GARDENS RUSKIN PARK ixton Rd Battersea, Nine Elms all ercial Comm Road Peckham MYATTS FIELD Stockwell Wandsworth St Brixton Rd Queenstown Road SW8 SW S W8 W8 ts war Ste Elephant & Castle, Camberwell 7% ylor Na Battersea Park K KENNINGTON PARK il St Hav Battersea Oval ad les Ro St. Gil SE17 SW8 9% Elephant & Castle

3 Overview reaches tipping point as lack of supply has now stalled growth in office Take-up % Change on Q4 14 Total Availability 672,3 sq ft -7% Availability Rate 3.1% -.2% Availability - New & Refurbished 353,669 sq ft -1% Availability - Secondhand 318,631 sq ft -13% Speculative Construction 389,443 sq ft No change Take-up 225,415 sq ft -7% Investment 169m -3% pt

4 Key Take-up Transactions 25 Lavington Street, SE1 Size - 31,3 sq ft Grade - Secondhand Grade B Rent: 25. psf 23 Blackfriars Road, SE1 Size - 31,164 sq ft Grade - Secondhand Grade B Rent: 43. psf Cottons Centre, Cottons Lane, SE1 Size - 25,252 sq ft Grade - Refurbished Rent: 45. psf The Shard, 32 London Bridge Street, SE1 Size - 15,383 sq ft Grade - New Rent: 59.5 psf

5 Quarterly Take-up by Grade Take-up was dominated by Secondhand Grade B stock (76%) and almost all transactions were under 5, sq ft (72%) 1. million sq ft Pre-lets New Refurbished Secondhand Grade A Secondhand Grade B

6 SE1 Annual Take-up by Submarket Take-up was evenly spread across Bankside, London Bridge, and Borough West all accounting for approximately one third of total Take-up each 18 s sq ft YTD Bankside London Bridge Waterloo Borough West Bermondsey

7 Named Occupier Take-up by sector Take-up in was dominated by Serviced Offices, accounting for 67% of transactions % Sector % 3 Years to 95% D A M I T 5% 193,823 sq ft Named Take-up Undisclosed (31,591 sq ft) DAMIT Design Advertising, Marketing & PR 23 Media 16 Internet 3 Technology & Telecoms 8 Banking, Finance & Insurance 2 Charities & Associations 7 Corporate 5 Education 3 Government 2 Legal 6 Professional Services 8 Retail & Leisure 4 Other 13 5% 5% 3,681,619 sq ft Named Take-up 3 Year rolling Undisclosed (287,421 sq ft) D A M I T Total Take-up: 225,414 sq ft Total 3 Year rolling: 3,969,4 sq ft

8 Central London Supply Compared currently has the lowest Availability Rate on record and without The Shard is only 1.7% Grade (sq ft) Midtown West End City New & Refurbished 353, ,857 76,357 2,326,141 Secondhand Grade A 96,139 41, ,948 2,939,254 Secondhand Grade B 221,87 414,757 1,7,82 446,571 Total 671,615 1,398,53 2,779,387 5,711,965 Stock 21,97,349 42,512,73 72,579,398 72,97,216 Availability Rate (%) 3.1% 3.3% 3.8% 7.9%

9 Quarterly Availability by Submarket While there is still New Availability situated in London Bridge and Bankside, Refurbished stock in is virtually nonexistent 26% BANKSIDE 35% 9% 16% 24% LONDON BRIDGE 39% 75% 8% WATERLOO BERMONDSEY 1% 92% 26% 74% BOROUGH WEST SE17 1% 9% SW8 SE11 91% New Refurbished Secondhand Grade A Secondhand Grade B 1%

10 Quarterly SE1 Office Availability by Grade is unique in Central London having no Refurbished stock currently available 1.5 million sq ft New Refurbished Secondhand Grade A Secondhand Grade B

11 Future Supply With the exception of the Central, SE1, delivering 225, sq ft office space in 216, the next wave of major development isn t due until 217 and m sq ft Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Let Completed Under Construction Hidden Supply There is currently 389,443 sq ft of speculative space under construction in eleven schemes

12 Future Supply Completions to Q Blackfriars Road, SE1 98,291 sq ft UBS Global Asset Management Q2 15 (88,86 sq ft LET) Global House, Great Suffolk Street, SE1 29, sq ft Overcourt Q Southwark Street, SE1 16,951 sq ft Standard Life Q Black Prince Road, SE1 15,242 sq ft Telford Homes Q2 15 (FULLY LET) Southwark Street, SE1 9,534 sq ft Standard Life Q One The Elephant, SE11 4,166 sq ft Lend Lease Q4 15

13 Future Supply Completions from Q2 16 to Central, SE1 224,784 sq ft Hermes Real Estate CPPIB Q Sky Gardens, SW8 35,5 sq ft Fraser Property Q Southwark Bridge Road, SE1 33,368 sq ft Oakmayne Properties Lone Star Q3 17 Shell Centre, York Road, SE1 275,257 sq ft Canary Wharf Group Qatari Diar Completion Wedge House, 32-4 Blackfriars Road, SE1 56,36 sq ft Derwent London Completion Elizabeth House, York Road, SE1 954,21 sq ft London & Regional Chelsfield Completion Brandon House, 18 Borough High Street, SE1 5,537 sq ft Crest Nicholson Completion 218 2

14 Retail & Leisure - Spotlight on Waterloo Waterloo's retail offer potentially improves with proposed consents Elizabeth House, SE1 16,146 sq ft of small shops and cafés Shell Centre, SE1 Up to 64,121 sq ft of retail is proposed at ground floor level across the site Up to 27,523 sq ft of community/leisure is proposed within the basement Marlin Aparthotel, 111 Westminster Bridge Road, SE1 3,56 sq ft of retail and 3,615 sq ft restaurant

15 Investment - SE1 Turnover by Submarket Investment totalled 169m in, marginally down 3% on Q4 14 ( 174m) Investor appetite remains extremely strong for the m ,37 2, Eight Year Annual Average - 747m Annual Turnover m Eight Year Annual Average (Excluding More London) - 535m 169m was Invested in 12 transactions in 1% of transactions undertaken by UK Investors Bankside London Bridge Waterloo Borough West Bermondsey 215 YTD

16 Notable Investment Transactions 48m Tower Bridge Piazza, Shad Thames, SE1 Sold by a Private Investor to Threadneedle Investments UK 79,164 sq ft 48m ( 66 psf) NIY 2.93% Freehold Total rent 1,485,765 per annum psf Edinburgh House, 17 Kennington Lane, SE11 Sold by a Private UK Investor to Workspace Group Plc 68,3 sq ft 25.3m ( 37 psf) NIY 5.2% Leasehold Total rent 1,52,6 per annum psf 25.3m

17 Notable Investment Transactions 16.2m Bermondsey Square, SE1 Sold by Aviva Investors (Igloo) to TIAA Henderson Real Estate 4,49 sq ft 16.2m ( 45 psf) NIY 5.9% Freehold Total rent 1,12,633 per annum psf 5-13 Trinity Street, SE1 Sold by a Private UK Investor to Marchmont 5,558 sq ft 3.3m ( 597 psf) NIY 5.26% Freehold Total rent 184,766 per annum psf 3.3m

18 Investment - Investor Breakdown Investor Type by Value in Investor Type by Value 3 years to % Investor Type % 2% UK Fund 21 UK Private / Other 6 UK Property Company 14 98% 2 Owner Occupier 7 52% 41% Overseas European 5 Overseas Middle Eastern 42 Overseas Far Eastern 2 Overseas Other 3 7% Total Turnover in 169m 169m UK vs. m Overseas Total Turnover 3 years to 4.16bn 2bn UK vs. 2.16bn Overseas N.B. Percentages may not sum to 1, due to rounding

19 Investment - Vendor Breakdown Vendor Type by Value in Vendor Type by Value 3 years to % Vendor Type % 1% UK Fund 12 UK Private / Other 11 UK Property Company 17 9% 1 Owner Occupier 6 54% 4% Overseas European 9 Overseas Middle Eastern 2 Overseas Far Eastern Overseas Other 43 6% Total Sold in 169m 169m UK vs. m Overseas Total Sold 3 years to 4.16bn 1.91bn UK vs. 2.25bn Overseas N.B. Percentages may not sum to 1, due to rounding

20 Investment - Investment Rationale Why? A market in transition - Built environment / infrastructure Lifestyle / Amenity / River frontage A platform for performance - Rental & Capital growth Sustainable? - Restricted market Pricing Prime Yields - 4.6% (More London / 85 & 89 Southwark Street) Capital Values psf Union Street Partners All rights reserved.

21 Investment - Who is actively Investing? SE1 Boultbee LDN Aberdeen Asset Management CIT Chelsfield Partners LLP Delancey Derwent London Development Securities Dorrington GMS Estates Ltd Great Portland Estates Grosvenor Helical Bar Land Securities London & Regional Marchmont Motcomb Estates Overcourt Institutions CBRE Global Investors Cordea Savills DTZ Investment Management Hermes Real Estate LaSalle Investment Management M&G Investments Royal London Asset Management Schroders Standard Life Threadneedle Investments UK TIAA Henderson Real Estate UBS Overseas CommerzReal CPPIB Deka Ho Bee Investment Jadwa Investment KGAL Longulf Meyer Bergman Qatari Diar St Martins Property Workspace Group

22 Investment - Who is actively Investing? SE11, SE17, SW8 Boultbee Brooks Real Estate Legal & General Ballymore Group CLS Rockspring Dalian Wanda Group Delancey Downing Institutions Schroders Threadneedle Overseas Dutch Government EPF Helical Bar UBS Frasers Property Lend Lease Sime Darby Mount Anvil SP Setia Notting Hill Housing US Government Oakmayne Properties St James (Berkeley Group) Wendover Workspace Group Union Street Partners All rights reserved.

23 House View We forecast last year that 215 would prove to be the tipping point in with demand outstripping supply, and this is certainly proving to be the case We predict significant regression in annual Take-up of available stock this year, and into 216 but corresponding increase in Pre-letting and lettings during construction Focus is now firmly on Vauxhall and Nine Elms where large-scale development is fully underway, which on completion will become a strikingly modern addition to the cityscape 's renaissance continues across the use classes as a number of hotels around Waterloo gain consent together with exciting plans for Lower Marsh, SE1, and the tunnels underneath Waterloo Station will remain a challenging market due to lack of liquidity Investor appetite remains strong in the for standing investments and redevelopment, however, the volume of transactions in 215 will once again be dictated by availability of opportunity

24 THE LONDON SOUTH BANK OFFICE MARKET Q1 215 Attention has turned to Vauxhall and Nine Elms where over 15bn of regeneration projects are underway to develop underutilised land to make way for new public spaces, schools, homes, and transport infrastructure. The area will deliver large scale mixed-used developments and will transform one of London s last remaining industrial districts into a world-class destination